Correlation Between Beazer Homes and DR Horton

Can any of the company-specific risk be diversified away by investing in both Beazer Homes and DR Horton at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Beazer Homes and DR Horton into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Beazer Homes USA and DR Horton, you can compare the effects of market volatilities on Beazer Homes and DR Horton and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Beazer Homes with a short position of DR Horton. Check out your portfolio center. Please also check ongoing floating volatility patterns of Beazer Homes and DR Horton.

Diversification Opportunities for Beazer Homes and DR Horton

0.0

Correlation Coefficient

Beazer Homes  DR Horton

Pay attention - limited upside

The 3 months correlation between Beazer and DHI is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Beazer Homes USA and DR Horton in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DR Horton and Beazer Homes is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Beazer Homes USA are associated (or correlated) with DR Horton. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DR Horton has no effect on the direction of Beazer Homes i.e., Beazer Homes and DR Horton go up and down completely randomly.

Pair Corralation between Beazer Homes and DR Horton

Considering the 90-day investment horizon Beazer Homes USA is expected to generate 1.22 times more return on investment than DR Horton. However, Beazer Homes is 1.22 times more volatile than DR Horton. It trades about 0.12 of its potential returns per unit of risk. DR Horton is currently generating about -0.06 per unit of risk. If you would invest  2,986  in Beazer Homes USA on September 2, 2024 and sell it today you would earn a total of  509.00  from holding Beazer Homes USA or generate 17.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Beazer Homes USA  vs.  DR Horton

Beazer Homes USA

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Beazer Homes USA are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent basic indicators, Beazer Homes demonstrated solid returns over the last few months and may actually be approaching a breakup point.

DR Horton

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DR Horton has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's technical indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Beazer Homes and DR Horton

The main advantage of trading using opposite Beazer Homes and DR Horton positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Beazer Homes position performs unexpectedly, DR Horton can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in DR Horton will offset losses from the drop in DR Horton's long position.

The idea behind Beazer Homes USA and DR Horton pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.